Analyst: Crisis in Japan Will Have 'Profound' Effect on Global Auto Industry

Analyst: Crisis in Japan Will Have 'Profound' Effect on Global Auto Industry

A shortage of vehicles and parts is possible.

The global automotive industry likely will feel the aftershocks of the devastating earthquake and tsunami that rocked Japan, some auto industry observers believe.

"The tragic events in Japan will most certainly have a profound effect on the Japanese economy and the global auto industry," Jeff Schuster, executive director of global forecasting at J.D. Power and Associates, wrote in his blog yesterday. "In fact, given the global linkages to other parts of the world through vehicle and parts exports, there is a risk that there may be a shortage of vehicles and parts in other regions of the world such as Western Europe and North America."

J.D. Power's Schuster: "There's no question that there's going to be an impact that goes beyond Japan."
In an interview with IndustryWeek.com, Schuster noted that most global automakers "are doing some business with a Japanese supplier or a Japanese company that could potentially impact their volumes." Although no automaker outside Japan has a heavy reliance on Japanese-made parts, he asserted that "it doesn't take many parts -- or in fact it may just take one part -- to not be able to assemble a vehicle." In such a scenario, automakers would have to look for alternate sources -- either a different plant within the supplier or a different supplier altogether -- which could impact profit margins. "These are all solvable problems. It really becomes a matter of how quickly operations [in Japan] can get back up and running," Schuster told IndustryWeek.com. Schuster emphasized that at this early stage, there still are a lot of unknowns. "But I think some trends are becoming clear," he said. "Just because of the sheer severity of this disaster, there's no question that there's going to be an impact that goes beyond Japan, at least for a period of time." In his blog, Schuster asserted that "there will be a lag before the impact will be felt," as automakers have some inventory of vehicles and parts on hand. However, he noted that vehicles such as the Toyota Prius and Nissan Leaf "are already in short supply." Disruption to Unique Parts Could 'Hit Output Badly' To Schuster's point, Toyota said it is curtailing production at its facilities in North America, and Subaru said it has suspended overtime at its Lafayette, Ind., plant until the two automakers get a handle on the availability of parts from Japan. The tsunami destroyed nearly 2,300 Nissan and Inifiniti vehicles waiting to be shipped from the port of Hitachi in Japan. A report from IHS Global Insight's Automotive Group noted that a number of ports along Japan's coast have been affected by the tsunami, "and shipping has been disrupted as priority is being given to disaster-relief efforts." "Internally within the country, road and rail lines have been destroyed throughout the regions north of Tokyo, so even if ports operate normally, the ability to transport goods over land is severely compromised and is likely to remain so for some time," according to IHS Automotive. Production stoppages among local suppliers could affect global production for the Japanese automakers, IHS noted, as "several of the affected component plants supply the OEMs' facilities around the world with systems and components that may not easily be shifted to other manufacturing locations." "Stoppages at those plants that produce parts that have second or third sources for manufacturing are unlikely to affect overall production very much, but disruption to production of parts that are unique and cannot be easily shifted has the potential to hit output badly at several automakers in the near term," the report said. 'Human Issues' In addition to the infrastructure issues such as damaged ports and factories, there are "human issues that are unlikely to be resolved anytime soon." "The tragic loss of life and homes across the region means that even if infrastructure and facilities can be repaired, whole communities that have supported many of these plants have been uprooted or are still unaccounted for," IHS said in the report. Follow IndustryWeek senior editor Josh Cable on Twitter at @JCable_IW .

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